Final Project on Sunrays Textile Mills Ltd.

Share |

We are providing Projects for your business growth and to meet new challenges. Here are some projects prepared by our team of "Developing New Projects" for the Guarantee of your business growth

This report has been written to fulfill the partial requirements of the subject “strategic management”.

Under the topic of strategic management, we are assigned to go through the whole process of strategic management for spinning industry paying special consideration to Sunrays Textile Mills Ltd.

We have arranged the whole report in a way that in the first part an introduction of spinning / textile industry and Sunrays Textile Mills Ltd is given.

In the second section an evaluation of the resources of the unit under discussion is made to explore the market position of the unit, then the environment has been discussed in which the unit is making its business operation.

In the third section of the study we have made a detailed strategic analysis of the spinning industry with special reference to Sunrays Textile Mills Ltd from different perspectives.

In the final section we concluded all our efforts and suggested some strategies to overcome the problems and the threats faced by the company.

We have prepared several reports and term papers during the study period of MBA. These were the opportunities to apply the knowledge of the subjects practically. This report, which is in your hand, is the best chance to have a practical application of the subject; strategic management and we think that it is the most important one of all managerial subjects we have studied. We portray our thanks to the faculty of the Department to include such an extensive subject in MBA. We are also thankful to Mr. Abdul Shakoor Khakwani for providing us with a precious chance to apply our knowledge of the subject in the form of this study on Sunrays Textiles Mills Ltd. A lot of time and efforts of us are involved in the preparation of this report, but we could not make such effort without cooperation of the management of company. We really acknowledge the cooperation of Mr. Mujahid, the export / marketing manager who spared time from his precious appointments and let us discuss the issue of strategic management. We are also thankful to Mr. Imran, the Manager Finance who provided us with all the necessary information, we needed. We are also thankful to all those people who provided information related to Textile / Spinning Industry. And thanks to Almighty Allah who blessed us with the ability to complete our job satisfactorily.

The biggest threat faced by Pakistani Textile sector is to retain its share in world trade after 2004, quota free era. The existing status of Textile Industry is not such that it can retain its share in global trade of textiles. The performance of Pakistan’s Textile Industry in the last five decades has been a little disappointing. Govt. policies are responsible for the pathetic performance of textile industry, but the players are equally responsible for the imbalanced growth and low unit price realization. The result is despite being the fourth largest cotton producing country, Pakistan’s share in global textile trade is less than 3 percent.

Textile vision 2005 is an attempt to identify problems faced by industry and to suggest economically viable and sustainable plan. But many industry’s experts say that it is heavily tilted towards spinning sector. Although they believe that a strong and efficient spinning base is the backbone of textile industry, Pakistan does not need to increase production of coarse counts of yarn. So instead of investing in spinning, the country should invest in made ups manufacturing and this will produce more job opportunities.

Pakistan can get an output of over 20 million cotton bales from the area. Presently under cotton cultivation, but actual production is around 9 – 10 million bales. Locally produced cotton is sufficient to meet the demand of spinners. Government has allowed free trade of cotton paving way for import of superior quality cotton. Local spinners use superior quality cotton for the production of yarn of coarse counts. Spinning machinery is not able to produce fine counts.

Sunrays Textile Mills Limited was established in 1987 as a public limited company and is listed on Karachi Stock Exchange. The company operates a spinning unit of 192000 spindles in Muzaffargarh ( 40 KM from Multan), which started commercial production in 1991.

Sunrays is part of family group of companies, Indus Group of companies, that is the leading textile group in Pakistan, operating in the sector of yarn manufacturing and cotton ginning. Indus group has been engaged in the textile industry since 1955. The current capacity of group includes 30,000 tons of cotton yarn and over 100,000 (16,000 tons) cotton bales annually. The group is involved in the supply of yarn to the national and international markets for the weaving and knitting industry. Other companies of Indus group are Indus dyeing and manufacturing company Ltd, Yusuf Textile Mills Ltd, cotton ginning and seed crushing factories.

Indus Dyeing and Manufacturing Company Ltd, was established in 1957. The company has spinning factory at Hyderabad of 37,000 spindles (divided into Mill 1, Mill 2, and Mill 3) and another unit in Muzaffargarh of 15360 spindles. It is public limited company and is listed on Karachi stock exchange. Over the years, it has shown a outstanding export performance for which it has earned trophies for highest export in cotton yarn from the FPCCI. In addition to manufacturing and exporting cotton yarn it also exports raw cotton, mainly to Japan.

Yusuf Textile Mills Ltd, a public limited company listed in Karachi Stock Exchange was set up in 1966. It consists of 15,696 spindles located in Karachi. Its production facilities have been modernized over the year and latest automatic cone winding machines of Murata; drawing machines of Toyoda and Toyoda ring frames have been installed.

The group has been operating Cotton Ginning and Seed Crushing Factories, since 1960. These are located near Multan in Shujabad, Gellawala and Bahadurpur, the prime cotton-growing regions in Punjab. Annual production of these factories is over 100,000 cotton bales (16,000 tons).

After four decades of relatively comfortable expansion and prosperity the textile sector of Pakistan is now faced with slower growth, more demanding customers, intense competitors and a deregulated global market so the need for attaining and maintaining international competitive advantage in business performance is more than ever before. Presently the local textile industry feels uneasy about its future due to significant changes that have taken place around the world affecting the textile business. Scope for textile production and supply is greatly diversified and the market of textile trade is virtually internationalized. International trade has been reformed and liberalized as part of the Uruguay Round. Rapidly growing economic regionalism has promoted regional economic integration and reshaped the supply pattern of textiles internationally. This regional integration has brought substantial disadvantages in trade condition to non-members countries. Advanced countries have further improved their competitiveness in value-added and superior products by achieving a high level of automation utilizing advanced technology. Eastern European countries have emerged as new and strong competitors on the European Community market based on their geographical proximity, Cultural similarities and advantage of lower cost in the textile industry. Due to unplanned growth in production capacity in some developing countries including Pakistan, the supply of textiles has become considerably more than demand resulting in tough competition among textile producing countries. In Pakistan cost of financing, the cost of operation and the cost of electricity are high as compared to competitor countries

Efficiency and effectiveness of any industry depends to large extent on the level of technology. On the average the plant and equipment in our textile industry is over 15 years old. BMR is required not only to replace old equipment but also to upgrade technology with the latest version. Unless BMR is done on a regular basis production quality as well as operational efficiency cannot be achieved as per international requirements. Govt. is providing loans to textile section for BMR. To make the Pakistan Central cotton center (PCCC) effective and efficient Govt. handed over the management control of PCCC to APTMA. PCCC is working for the improvement of cotton quality and to accelerate the research work.

Every manufacturing organization requires marketing department in order to market its products effectively and to enhance the sales volume. Now it is the job of the marketing department to set such strategies and policies that the customers are deeply influenced by the product of that organization. Sunrays is part of Indus Group – they too have set up their marketing policies regarding their products. In order to market a product one has to consider two major factors the customers and the competitors.

There is perfect competition in the spinning industry market of Pakistan. Sunrays has to face two types of competitors these days, competitors from within the country and foreign competitors. As the products of all the spinning unit are not much differentiable so there is high degree of competition. The major foreign competitors are India, China, Korea, and Indonesia etc. As the operating cost is very high in Pakistan it is very difficult to complete with foreign competitors on the basis of price.

Major customers of Sunrays are USA and Japan. Sunrays is exporting 70 %of its yarn and the remaining is sold to local customers. Sunrays fully satisfies the needs and wants of its customers.

As quality conscious company it believes that it is one collective responsibility to provide quality yarn to keep customers satisfied.

Ever since the advent of science the Human Society has been undergoing changes with its consequent impact on environment, social behaviour and pattern of life. It will not be wrong to say that in search of scientific and industrial progress we have been constantly changing the shape of natural surroundings around us. Natural rivers, meadows, true plantations and in fact every conceivable thing of beauty has come under stress due the industrial boom. The peace and tranquility is gone in the noise and din of automation, giant machinery and industrial plants. The environment pollution has become a problem all over the world. The Western scientists due to constant research have recommended alternative measures to check the deterioration of their environment but situation in Pakistan is however different as there is no regulatory body to check pollution.

The company has contributed over Rs-----toward employees old age benefit institution and paid as much as Rs-----as taxes and contributed Rs-----toward education cess, collected by Government for education of children of worker of company . Company has workers and employees not only from inside the surrounding areas but also from the far places. To solve the residential problems of the non-local employees and their families, Company has its own residential colony.

Sunrays Textile Mills Ltd employs 650 employees and provides indirect employment to numerous people.

Resource Audit

Physical Resources

The company invested Rs. 20 million this year and replaced the old 1990 model machinery with the state of art latest technology (German Reiter 2000 model). The capacity of company is 19200 spindles. The plant is situated on MM Road, 14 KM from Muzaffargarh.

Company has professional management and skilled technical staff and trained labour force. Management of Indus group includes Mian Mohammad Ahmed, who started his textile business 40 years ago. He is responsible for strategic corporate planning. Shazad Ahmad MBA (Marketing) from USA. Mr. Naveed Ahmed Graduate from USA in Accounting. Irfan Ahmad, B.Sc Textile from USA. Riaz Ahmad who has leadership qualities, cotton ginning expert Kashif Riaz (MBA). The other management staff includes about 20 personnel including managers, assistant managers and engineers in different sections of organization. A present figure of total employees in organization is approximately 650 including management staff and labour force. Company gives on job training to employees.

Sunrays Textile Mills Ltd Brands RUBGY and LUCUS are known as quality yarn in national and international markets. Company has good image and reputation in market. The good will of company can be seen from the fact that company is exporting its yarn to USA and Japan, which are very quality conscious markets.

The company performs all activities efficiently and effectively to produce competitive priced, good quality and in time products.

Major inputs used, as raw material is cotton and man made fiber (MMF). The company mostly purchases cotton from group’s ginning factories. In this way company has more control over the quality of cotton. Sunrays also imports cotton if the good quality cotton is not available in country. As cotton is seasonal product so company has to store to meet the annual requirement. For the storing purpose the company has warehouse to keep cotton fresh at each time. The company tries its best to keep the quality of cotton better. Cotton is the main inventory of mill, which the company buys in the months of Oct, Nov, Dec, Jan, and Feb. The other inventory includes the consumable store and spare parts.

Quality is maintained at each and every step of production process. It is not easy to maintain the quality of yarn because there many variable of quality like moisture, fiber length, fiber fineness, fiber strength, count variations, count least strength, unevenness, thin places, thick places, nips, single yarn strength, elongation. There is quality control department headed by GM. Technical manager and laboratory Incharge are responsible for the quality of yarn. Company has fully equipped quality control laboratory where quality is measured using different statistical technique.

Sunrays do not have to store finished inventory because the yarn is produced on order. The yarn is packed and shipped as per export requirements.

As yarn is industrial product there is less need of advertisement. They sell their products usually through agent (commission agent). They have launched their web page on internet to promote their products internationally.

Sunrays responses quickly to its customers if the product fails to meet customer’s requirements or if the product has some fault and customer complains about product Sunrays give the response of customer’s complains as soon as possible. It believes in relationship marketing.

The main raw material is cotton. They have their own purchasing department in which cotton selectors select the good quality cotton. They took samples and samples are tested in the laboratory under the supervision of GM. If the cotton fulfills their selection criteria, then they purchase the cotton.

The company tries to perform all activities in such a way that maximum efficiency and effectiveness can be achieved. It tries its best to produce yarn according to the customer’s requirements.

The company recruit, train, develop and rewarded employees within the organization in such a way so that they can prove themselves as assets for the company.

All infrastructures related to quality control, information management, finance, planning are available within the organization.

From the above ratio analysis of Sunrays Textile Mills Ltd, we see that from 1996 to 1999, the firm is not much liquid because its current assets are less than current liabilities but in 2000 its current assets are exceeded than current liabilities. So in 2000 it is considered to be a liquid firm.

If we analyze the activity of Sunrays Textile Mills Ltd, over the last 5 years, we see that the firm has become efficient in collecting its account receivables as it has reduced its average collection period. Moreover there are improvement in inventory turnover, fixed asset and total asset turnover etc

If we analyze the profitability of the firm, we see that gross profit margin, net profit margin, operating profit margin, return on assets, return on equity has increased from 1996 to 2000. So we can say that the firm is operating in profit.

If we analyze the debt ratios of the firm, we see that the firm is increasing its external debt every year and thus it has to pay interest expense every year which is increasing.

In conclusion we can say that the firm is in better financial position in terms of profitability, activity. But still the firm is using almost 50 % external debt.